RGP

Resources Connection ($RGP) Executives Buy 180K Shares Despite 50% Stock Plunge..."Bottom Signal" Draws Attention

11/13/2025 21:36

Resources Connection ($RGP) is drawing market attention as executives and directors continue aggressive buying amid a 50% stock price plunge. This business consulting and workforce solutions specialist, despite maintaining a solid client base serving 88% of Fortune 100 companies, has faced investor skepticism due to recent performance challenges. Resources Connection, founded in 1996, is a global professional services firm providing business transformation consulting and on-demand talent solutions. Based in Dallas, the company operates through three primary brands: On-Demand by RGP, Veracity by RGP, and Countsy by RGP, partnering with ServiceNow, SAP, and Workday to deliver digital transformation services. Notably, its recently launched AI accelerator platform rIQ, built on ServiceNow, offers intelligent AI services integrated across 30+ enterprise systems, providing clear differentiation. The most striking development has been the consistent buying pattern by executives and directors throughout 2025. When shares plummeted from the $6 range to $5 in April, then-CEO Kate Duchene purchased 20,000 shares at $5.14, COO Bhadreskumar Patel bought 9,900 shares at $5.05, and Director Roger Carlile acquired 25,000 shares at $5.06. This simultaneous large-scale buying by the entire management team demonstrated their view of the price decline as a buying opportunity. More impressively, this buying pattern has persisted. In October, former CEO Duchene added 23,015 shares at $4.36, and in November, Director Jeffrey Fox and related investment fund CG Core Value Fund purchased 100,000 shares at $4.52-4.53 over two concentrated days, representing the year's largest insider buying transaction. These strong insider buying signals contrast with the company's recent fundamentals. Resources Connection has indeed struggled with 10-14% quarterly revenue declines. Q2 2025 revenue fell 10.7% year-over-year to $145.6 million, worsening to a 14.5% decline at $129.4 million in Q3. The core On-Demand Talent segment has been particularly pressured with over 20% revenue declines. However, the company's challenges appear largely driven by one-time and cyclical factors. Massive net losses primarily stem from goodwill impairment charges ($79.5 million in Q2, $42 million in Q3), which are non-cash accounting treatments. Adjusted EBITDA remains positive, indicating the underlying business profitability remains intact. Crucially, the company's financial health remains robust. Resources Connection maintains $77 million in cash with over $246 million in total liquidity while carrying virtually no long-term debt. Its debt-to-equity ratio stands at just 12%, providing exceptional financial stability that enables aggressive investment and growth during economic recovery. A notable change is the leadership transition. Roger Carlile assumed the CEO role on November 3, with former CEO Duchene remaining as Executive Advisor through January 2026 to ensure smooth succession. Carlile, having served as director with deep company knowledge, notably purchased 25,000 shares during the April decline, demonstrating his conviction through personal investment. Investors should note positive demand signals from increased pipeline activity. The company provided Q2 2026 revenue guidance of $115-120 million, indicating improving demand environment in the new year. Management is pursuing multi-pronged profitability improvements including cross-selling expansion, consulting rate increases, utilization improvements, and fixed cost reductions. At the current $4.65 share price, Resources Connection's market capitalization stands at just $151 million. The price-to-sales ratio of 0.28x significantly underperforms the industry average of ~1.0x, while the price-to-book ratio of 0.73x trades below book value. This represents clear undervaluation, consistent with aggressive insider buying. Investors should consider several risk factors. Revenue decline timing for reversal remains uncertain, and the consulting industry's economic sensitivity could delay recovery if corporate cost-cutting pressures persist. Additionally, the high dividend payout ratio of 155% raises sustainability questions given current losses. Overall, Resources Connection likely presents an attractive investment opportunity at current levels. The combination of a solid Fortune 100 client base (88% penetration), strong financial structure, innovative AI platform launch, and most importantly, management's confident large-scale buying provides compelling support. The fact that executives are backing their conviction with personal investment capital sends a powerful signal to external investors. While shares have declined ~50% over the past year, this appears to represent an overreaction. The insider trading pattern shows consistent buying in the $4-5 range, suggesting this level serves as strong support. Investors should monitor upcoming quarterly results for revenue decline moderation and margin improvements, considering profit-taking opportunities upon recovery toward the $6-7 range.